11/21/2008 @ 6:00AM

The Negotiator's Playbook

Life is one big negotiation–be it with your boss, spouse, customers or the used-car salesman.

Formidable deal makers like Warren Buffett, Bill Clinton and sports agent Scott Boras tend to be born, not made. But talk to negotiating pros from the worlds of government, finance and media, and they’ll admit there is at least some science to this art–and there’s no better time to master it than in a severe economic downtown.

Knowing, for instance, how to negotiate easier terms with suppliers can be the difference between conquest and carnage. “Vendors will be more lenient when it comes to negotiating financing options if they can lock you into a long-term contract,” notes Gregg Bedol, business consultant with Red Zone Consulting in Atlanta. In this environment, Bedol recommends angling for friendlier financing on high-volume items like paper, ink and toner.

Winning every point in a negotiation is rarely an option, of course, but if you keep a few principles in mind, you can tilt things in your favor–whether you’re signing a peace treaty or re-jiggering contracts.

If you remember one thing about negotiating, it should be this: It’s not the maneuvering once you’re in the trenches, but rather the preparation before sitting down at the table that counts.

“Before you even begin the actual negotiation, you need to do your homework,” says Ontario-based negotiating coach and business consultant Michael Sloopka. “Research all the facts on both sides of the deal. Make sure you have a clear, desired outcome.”

Good preparation means knowing precisely what you are willing to accept–and at what point you will walk away. That goes for your opponents, too: True leverage comes from knowing how far they are willing to go to get what they want.

“It’s essential that you understand the other negotiator’s pressures,” says Ed Brodow, negotiating consultant to some of the world’s most prominent companies including
Microsoft
,
McDonald’s
,
Cisco Systems
,
Goldman Sachs
and
Johnson & Johnson
. “Ask yourself, ‘Why do they need me?’ That’s where your power lies.”

Remember, too, that most people aren’t very good listeners. If you want your opponent to concede something, let them feel like they’re being heard.

“I use the 70-30 rule: listen 70% of the time and talk only 30%,” says Brodow. The best way to encourage that, he adds, is by asking open-ended questions that can’t be answered with a simple yes or no, such as, “What is most important to you in this agreement?”

Having a handle on your own strengths and weaknesses is also critical. For example, one-off transactions favor competitive types who see the negotiation as a game they must win. (Think Donald Trump.) If you are naturally more at ease with building consensus and nurturing long-term relationships, let someone else take the lead.

Before you start haggling, establish what negotiating textbooks lovingly call the ZOPA, or zone of possible agreement. There’s usually a large area of overlapping agreement, and it’s nice to be able to remind your opponent of that when details threaten to derail the discussion.

Early in the back-and-forth, try to establish some trust, says George Mitchell, ex-Senate majority leader and former chair of the International Commission on Disarmament in Northern Ireland, who spoke with Forbes.com on this topic last year. “In Ireland, I tried to set up a process that people felt was fair in that they had a chance to make their case,” he says. “I made it a point to tell them I [come from a system] where we had unlimited debate. I sometimes regretted that [later] when I was listening to 15-, 16-, 18-hour speeches–but it was important for helping things move forward.”

Better yet, try to make the other side feel like they’ve won. “The best negotiations are ones in which both parties leave feeling like they’ve gained something from the exchange,” says Kathleen McGinn, a professor of negotiations at Harvard Business School. The key, adds McGinn, is making it clear that, in relinquishing something that is clearly valuable to you, you feel that the overall mission is better served.

Finally, if you can’t find the ZOPA, have enough discipline to walk away. That advice comes from a guy who has negotiated a few deals and doesn’t like to lose: Sandy Weill, former chief executive of
Citigroup
.

“I would always get very excited–and very disappointed” when a deal didn’t pan out, admitted Weill when we spoke with him in 2007. “Sometimes [the price] just doesn’t make sense to you, or the [target company] has a certain culture that you don’t feel is going to fit together. You’ve got to have the discipline to walk away. Lo and behold, something better would come along in six months or a year, which in most cases was a much better deal.”